Advanced Search
MyIDEAS: Login to save this article or follow this journal

Nuclear Power: A Hedge against Uncertain Gas and Carbon Prices?

Contents:

Author Info

  • Fabien A. Roques
  • William J. Nuttall
  • David M. Newbery
  • Richard de Neufville
  • Stephen Connors

Abstract

High fossil fuel prices have rekindled interest in nuclear power. This paper identifies specific characteristics making nuclear power unattractive to merchant generators in liberalized electricity markets, and argues that non-fossil fuel technologies have an overlooked option value given fuel and carbon price uncertainty. Stochastic optimization estimates the company option value of keeping open the choice between nuclear and gas technologies. The merchant option value decreases sharply as the correlation between electricity, gas, and carbon prices rises, casting doubt on whether merchant investors have adequate incentives to choose socially efficient diversification in liberalized electricity markets.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.iaee.org/en/publications/ejarticle.aspx?id=2155
Download Restriction: Access to full text is restricted to IAEE members and subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by International Association for Energy Economics in its journal The Energy Journal.

Volume (Year): Volume 27 (2006)
Issue (Month): Number 4 ()
Pages: 1-24

as in new window
Handle: RePEc:aen:journl:2006v27-04-a01

Contact details of provider:
Postal: 28790 Chagrin Blvd Ste 350, Cleveland, OH 44122, USA
Phone: 216-464-5365
Fax: 216-464-2737
Email:
Web page: http://www.iaee.org
More information through EDIRC

Order Information:
Web: http://www.iaee.org/en/publications/ejsearch.aspx

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Bar-Ilan, Avner & Strange, William C, 1996. "Investment Lags," American Economic Review, American Economic Association, vol. 86(3), pages 610-22, June.
  2. Frayer, Julia & Uludere, Nazli Z., 2001. "What Is It Worth? Application of Real Options Theory to the Valuation of Generation Assets," The Electricity Journal, Elsevier, vol. 14(8), pages 40-51, October.
  3. Shimon Awerbuch & Raphael Sauter, 2005. "Exploiting the Oil-GDP Effect to Support Renewables Deployment," SPRU Working Paper Series 129, SPRU - Science and Technology Policy Research, University of Sussex.
  4. Pindyck, Robert S., 1993. "Investments of uncertain cost," Journal of Financial Economics, Elsevier, vol. 34(1), pages 53-76, August.
  5. Gollier, Christian & Proult, David & Thais, Françoise & Walgenwitz, Gilles, 2004. "Choice of Nuclear Power Investments ander Price Uncertainty: Valuing Modularity," IDEI Working Papers 270, Institut d'Économie Industrielle (IDEI), Toulouse.
  6. Li, Ying & Flynn, Peter C., 2004. "Deregulated power prices: comparison of volatility," Energy Policy, Elsevier, vol. 32(14), pages 1591-1601, September.
  7. Murto, Pauli & Nese, Gjermund, 2002. "Input price risk and optimal timing of energy investment: choice between fossil- and biofuels," Working Papers in Economics 15/02, University of Bergen, Department of Economics.
  8. Cox, John C. & Ross, Stephen A. & Rubinstein, Mark, 1979. "Option pricing: A simplified approach," Journal of Financial Economics, Elsevier, vol. 7(3), pages 229-263, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:aen:journl:2006v27-04-a01. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Williams).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.